Pension spiking case studies in Wash. state

While Hull said in an interview that his final salary bump wasn’t designed to inflate his pension, emails show part of the Lakewood raises were developed over the span of several weeks, with retirement in mind. The men were already slated to get a salary bump at the beginning of 2010 but that was pushed even higher by an addendum approved in November 2009.

Then-Fire Chief Ken Sharp and finance director Koree Wick said in interviews that the late raises were designed to incentivize retirements by boosting pension values. They said the local fire officials were having budget troubles and were interested in some staff retirements to help with a potential merger with a nearby fire district.

The pensioners who earned late raises were all part of LEOFF-1, short for the Law Enforcement Officers’ and Fire Fighters’ Retirement System Plan 1. About 1,000 veteran public servants have retired into the LEOFF-1 system over the past decade, leaving only about 200 active workers remaining.

Pension values for most Washington government employees — who work under more than a dozen different retirement plans — are based on a snapshot of their salaries over a long period of time, such as a five-year window for many teachers. But workers hired into the LEOFF-1 system before October 1977 have benefited from unique provisions in their plan that typically calculate pension values based largely on the final paycheck they earned.

States have dealt with pension-spiking problems around the country even when retirement values are based on earnings over the span of 12 months, said Jun Peng, an associate professor at the University of Arizona who has studied pension systems in several U.S. states. He said the idea that Washington state would allow pension values to be determined by a final paycheck was “scary.”

“That seems outrageous,” he said.

The pay raises in Lakewood were approved legally by a board of fire commissioners, which meets for hearings with minimal public attendance, though it’s not clear whether the raises should have qualified as pensionable earnings under state rules.

All of the late salary increases reviewed by AP came during times of budget and economic struggles over the past five years. At the meeting during which the Lakewood salary addendums were approved, in the middle of national economic turmoil, commissioners talked about their own financial problems and the need to find cost-saving measures.

That same night, the board asked some workers in the district to contribute more to cover their medical costs.

Crafted contracts

Raises also helped encourage retirements in places like Kelso and Quincy. Meanwhile, some long-time chiefs in places like Walla Walla and Mason County got big raises before their retirements, with local officials arguing the leaders weren’t being properly compensated.

In other cases, officials used carefully crafted contracts and let workers decide whether they wanted to retire when temporary raises were in effect.

In Bremerton, a contract clause brokered between city officials and the local firefighters’ union in 2009 provided a temporary pay increase of 12 percent to a remarkably narrow group: lieutenants and captains in the LEOFF-1 system who had served 30 years and one month with the department. The unusual pay increase, according to the negotiated contract, lasted only 30 days.